Did you have encrypted passwords enabled in your old version of Samba
too? Or did you just enable this when you upgraded?

> interfaces = eth0
> log level = 1
> passdb backend = smbpasswd

The default passwd backend is tdbsam. The smbpasswd backend is the
old format that doesn't support all of the features supported by other
backends. I don't know if this has anything to do with the problem,
but maybe you could try switching to tdbsam.